Why Quant Mutual Funds Are Outperforming?

Quant mutual funds have been making waves in the Indian investment world lately. Investors are buzzing about their impressive growth and unique approach. But what's behind their recent success? Let's dive in and explore why Quant mutual funds are topping the charts and catching everyone's attention.

Overview of Quant Mutual Fund

Quant Mutual Fund has seen remarkable growth in recent years. As of May 2024, it manages 27 funds with a total asset under management (AUM) of over ₹84,000 crore. What's even more impressive is its investor base—it now maintains 79 lakh folios.

To put this growth into perspective, let's look at their journey:

● In December 2019, Quant had an AUM of just ₹166 crore with 19,829 folios.
● By December 2020, this grew to ₹488 crore with 58,737 folios.
● December 2021 saw a significant jump to ₹5,455 crore and 6,79,559 folios.
● In December 2022, they reached ₹17,228 crore with 19,39,220 folios.
● And now, in May 2024, they've hit ₹84,000+ crore with 79,00,000 folios.

This rapid growth shows that more and more investors trust Quant's unique investment approach.

History and Background of Quant Mutual Fund

Quant Mutual Fund has a rich history dating back to 1996, making it one of the oldest mutual funds in India. However, its recent success story began in 2018 when Quant Capital acquired Escorts Mutual Fund and gave it a complete makeover.

When Quant took over, the fund was relatively small, but Quant had big plans. The new Quant team made some major changes to how they did things. They brought in new people, ideas, and a whole new way of investing.

Quant's approach involves using advanced technology and data analysis to make investment decisions. They call this 'Predictive Analytics'. This tech-savvy method has helped Quant navigate tricky market conditions and emerge as one of the top Asset Management Companies (AMCs) in India.

What sets Quant apart is its dynamic and active style of money management. It's not afraid to make quick changes to its investments if its data suggests it's the right move. This flexibility, combined with its focus on research and innovative product offerings, has attracted a large number of investors.

Quant Mutual Fund offers various schemes across different categories - equity, tax-saving, debt, and hybrid. This variety allows investors to choose funds that best match their financial goals and risk appetite.
Factors Contributing to Topping the Charts
So, what's behind Quant Mutual Fund's impressive performance? There are several key factors:

● Data-driven approach: Quant relies heavily on advanced analytics and complex algorithms to make investment decisions. This helps them spot trends that human fund managers might miss.

● Flexibility: The fund is known for rapidly changing its portfolio based on market conditions. It is not tied to any particular investment style or sector.

● Active management: Quant actively manages its portfolios, unlike passive funds, which simply track an index. This allows them to potentially capitalise on short-term market movements.

● Diverse offerings: Quant offers various funds across different categories, appealing to investor needs and risk profiles.

● Focus on absolute returns: Quant aims for absolute returns regardless of market conditions rather than just trying to beat a benchmark.

These factors have helped Quant's funds perform exceptionally well, attracting more investors and growing their AUM significantly.

Investment Philosophy and Strategy

Quant Mutual Fund's investment philosophy is built on three key principles: Active, Absolute, and Unconstrained.

● Active: Quant believes that passive investment strategies are no longer enough to outperform in today's dynamic world. They argue that real alpha (excess returns) comes from active strategies that can adapt to changing market dynamics.

● Absolute: Instead of focusing on relative performance against a benchmark, Quant aims for absolute returns regardless of market conditions. This absolute focus gives them clarity in their investment decisions.

● Unconstrained: Quant doesn't limit itself to any particular investment style or sector. It believes success in investing comes from considering a wide range of perspectives and being ready to seize opportunities wherever they arise.

At the heart of their strategy is the VLRT framework—valuation, Liquidity, Risk, and Timing. This approach allows them to be very flexible in their investments. They're not tied to traditional categorisations like growth or value investing. Instead, they let their data guide them to what they believe are the best opportunities at any given time.

This philosophy translates into a dynamic investment strategy. Quant is known for frequently changing its portfolios based on its analysis. While this can lead to higher transaction costs, it has also allowed Quant to potentially boost returns by capitalising on short-term market movements.

The strategy of Quant Active Fund Investment

Look at one of Quant's popular funds: the Quant Active Fund. This is a multi-cap fund, which means it can invest in large, medium, and small companies.
The Quant Active Fund perfectly embodies the fund house's investment philosophy. Here's how:

● Diverse portfolio: As a multi-cap fund, it invests at least 25% each in large-cap, mid-cap, and small-cap stocks. This diversification helps spread risk while capturing growth opportunities across market segments.

● VLRT methodology: The fund uses Quant's proprietary VLRT (Valuation, Liquidity, Risk, Timing) approach for stock selection. This comprehensive framework helps in making data-driven investment decisions.

● Dynamic allocation: The fund's portfolio can change dramatically over short periods. For instance, its top 10 holdings in November 2021 differed completely from those in March 2020.

● Sector-agnostic approach: The fund doesn't stick to any particular sector. It goes where the data suggests the best opportunities are, regardless of industry.

● Frequent rebalancing: The fund managers aren't afraid to make big changes when their analysis suggests it's beneficial. This can lead to a high portfolio turnover but also allows them to potentially capitalise on market movements.

This strategy allows the Quant Active Fund to respond highly to market changes. However, it's important to note that this high-turnover approach can also lead to higher costs and potentially more short-term volatility.

Quant Small Cap Fund vs Other Small-Cap Funds: The Key Differences

The Quant Small Cap Fund has been one of the standout performers in Quant's lineup. Here's how it differs from many other small-cap funds:

These differences highlight Quant's unique approach. While their strategy has led to strong performance, investors need to understand that it may also come with higher volatility and potentially higher costs due to frequent trading.

Conclusion

Quant Mutual Fund's impressive growth and performance stem from its unique, data-driven approach to investing. Its willingness to embrace technology, make rapid portfolio changes, and look beyond traditional investment philosophies has set it apart in India's mutual fund landscape.